Issue 53  April 26th 2023

What if you missed the tax deadline?

If you missed Tuesday, April 18th tax filing deadline, I would urge you to file as soon as possible. Taxpayers who owe, and missed the deadline without requesting an extension should file quickly to limit penalties and interest. Taxpayers should file their tax return and pay any tax they owe as soon as possible to reduce penalties and interest. An extension to file is not an extension to pay. An extension to file provides an additional six months with a new filling deadline of October 16th. Penalties and interest apply to taxes owed after April 18th and interest is charged on tax and penalties until the balance is paid in full. Filling and paying as much as possible is key because the late filling penalty and late payment penalty add up quickly. Even if a taxpayer can’t afford to immediately pay the full amount of taxes owed, they still should file a tax return to reduce possible late filling penalties. The IRS offers a variety of options for taxpayers who owe the IRS but cannot afford to pay. For more information about the variety of options click on the link below.

Penalties & Interest Explained

Interest accrues on unpaid balance and compounds daily from April 18th until you pay the balance in full. The rate is equal to the federal short term rate plus three percentage points. The first quarter 2023 interest rate for underpayment is 7%.

Late Payment Penalty
Late payment penalty is imposed on tax that you owe but did not pay by April 18th. Late payment penalty equals to 0.5% of the tax owed after April 18 for each month. The penalty is capped at 25% of the amount owed.

Failure to file Penalty (FTF)
If you did not file your tax return by the April 18th and did not request an extension to file, the IRS can impose 5% FTF penalty on any unpaid taxes for each month, and the penalty won't exceed 25% of your unpaid taxes. If you return is over 60 days late, the minimum FTF penalty is the smaller of $435 (for tax returns required to be filed in 2023) or 100% of the tax required to be shown on the return.

Failure to Pay Penalty (FTP)
If you still have not paid what you owe five months after April 18th, FTF penalty will max out, but the FTP penalty will continue until tax is paid, up to 25%.

How does Installment Agreement work?

If you owe taxes but are not able to pay all of it, you should consider setting up an installment agreement with the IRS or the state you file in. If you are an individual, you may qualify and apply online for long term payment plan (if you owe $50,000 or less) which would allow you to pay in 72 installments or for short term payment plan (if you owe less than $100,000 in combined tax, penalties, and interest) which would allow you to pay in 180 days.

The state of Louisiana also allows taxpayers to set up an installment agreement which allows taxpayers to pay over a period of minimum six months and maximum of 36 months. Both Federal and Louisiana installment agreements have a setup fee. Below is the link to the IRS website where you can read some more details about setting up short- or long-term installment agreements. The form which you would use to apply for Louisiana Installment Agreement is R-19026.

Where is my refund?

The IRS issues refunds in 3-4 weeks, however it is possible that your tax return may require additional review and take longer. 9 out of 10 times if you provided direct deposit information for your refund, based on the IRS, the taxpayers can expect to receive refund in less than 21 days. Below is the link where you can check the status of your federal tax return refund.